Volatility Inside a Range

With yesterday's Retail Sales data in the rearview, the base case between now and the first week of December is for more moderate volatility in a relatively flat range.  Nothing about today's trading is arguing for a different take.  Econ data was generally supportive, so today's range-bound volatility is pushing yields back toward the floor of this week's range.

To be clear, the "base case" is not a prediction.  It's merely the least surprising path for rates in the absence of any legitimate surprises.  An exogenous shock or a highly consequential piece of news can certainly do what those things always do.  The point is that if we don't see any such surprises, the inbound economic data would have to be quite far from forecasts to coax yields out of the current range.

What is the current range?  There are a few different cases to be made.  On the bearish side, the recentness of the 4.70 ceiling (3 days ago) means it is worth considering.  On the bullish side, the 4.34% ceiling that existed before the September break-out isn't a crazy low range target given the shift in Fed verbiage, economic data, and even the Treasury issuance outlook.

Amid those extremes, the most central range would be just over 4.4 on the low end and 4.55 on the high end.  It's rare to see a range that narrow follow a level of volatility seen in recent weeks, but that's why it's the base case and not a prediction. Regardless of the yields in question, the theme is that bonds are cooling back down after a big scare in late October.